SA's Transnet wins $400m NRZ tender

Published: 10 August 2017

GOVERNMENT has awarded the tender for the $400 million recapitalisation of the National Railways of Zimbabwe (NRZ) to South Africa's Transnet, which is partnering a consortium of non-resident Zimbabweans in the project, The Financial Gazette reported.

NRZ board chairman, Larry Mavhima, yesterday told The Financial Gazette that the Transnet-DIDG consortium had won the tender.

"I can confirm that we have received correspondence from SPB (State Procurement Board) that the Diaspora Infrastructure Development Group, in partnership with Transnet, has won the tender to recapitalise NRZ," Mavhima said.

"DIDG's bid price was $400 million, the amount which we were looking for. We have worked very hard for this since I came in as board chairman and now we have been given the authority to engage them for further discussion."

There were five other bidders for the NRZ revival, namely China Civil Engineering, Sino Hydro, accountancy firm Crowe Horwath & Welsha, SHM Railway of Malaysia and Croyeaux Limited of Zimbabwe.

The NRZ board appointed a transaction advisor, Deloitte, and held a pre-bid conference in Bulawayo in May this year.

The recapitalisation programme is expected to re-equip the parastatal and make it competitive.

Over the years, diminishing revenues, coupled with the high operational costs, had seriously affected the NRZ's reinvestment and maintenance programmes, to the extent that the locomotive and wagon fleet has been severely reduced.

The NRZ requires about $2 billion to turn around its fortunes, but the $400 million would help reposition the parastatals for self sustenance.

The company is a vital cog in the country's economy and has potential to become an important regional transport hub.

The NRZ network provides a vital link between landlocked countries like Zambia, Democratic Republic of Congo as well as seaports in South Africa and Mozambique. It is hoped that the restoration of NRZ's operational capacity will renew confidence in industry and make the parastatal a preferred and cheaper mover of bulk freight in and outside the country.

NRZ's goods transport business, which at its peak was raking in about 95 percent of the company's revenue, has declined to about 2,8 million tonnes of cargo annually from a peak of 18 million tonnes shipped in 1998.

DIDG is fronted by Johannesburg-based Donovan Chimhandamba and involves non-resident Zimbabwean professionals, mostly based in South Africa.

The vehicle has raised $400 million in structured finance, Chimhandamba told The Financial Gazette in June.

Part of the DIDG consortium's proposal would entail the creation of a separate joint venture company with the NRZ, with Transnet providing the technical expertise, as well as its strategic assets and regional footprint.

"Transnet is a technical partner. It's not just a financial solution, looking at the capital requirements. For us, the market is a regional play. The real value is in capturing the regional market and Transnet is key in that regard," Chimhandamba said, citing the South African firm's forays into Zambia and the DRC as well as its port infrastructure.